Retailer Circuit City Stores reported a wider first-quarter loss on Thursday as sales fell amid the challenging U.S. consumer spending environment, and said it has suspended dividend payments to save cash.
The consumer electronics chain, which received a takeover offer from Blockbuster Inc earlier this year and is allowing the movie-rental company to view its books, also cut capital spending for the year and forecast a wider second- quarter loss.
But Circuit City added it expects a “gradual recovery” in the second half.
The net loss came to $164.8 million, or $1 a share, for the first quarter that ended May 31, compared with a loss of $54.6 million, or 33 cents a share, a year earlier.
Sales fell 7 percent to $2.3 billion in the quarter as weaker U.S. sales offset rising international revenue. Sales at stores open at least a year, or same-store sales, fell 11.3 percent overall.
Circuit City’s results contrasted sharply with main rival Best Buy Co, which reported a better-than-expected quarterly profit this week on rising sales and cited market share gains.
Circuit City said it was still exploring strategic options. The company became the focus of takeover rumors in the past year as its results weakened.
It initially refused to open its financial books to Blockbuster, citing concerns about financing, but reversed that position in May after billionaire investor and Blockbuster shareholder Carl Icahn expressed willingness to buy the company if a Blockbuster deal did not materialize.
Circuit City had also come under criticism from activist investors pushing for change in recent months. Last month, it agreed to select three director nominees put forth by industry investor Mark Wattles and include them as board candidates at this year’s annual meeting, ending a proxy fight.
The company said it believes it has adequate liquidity to fund a turnaround, but said its board suspended future dividend payments to converse cash.
The company also cut its capital spending for the year to $120 million to $140 million from a previous forecast of $130 million to $150 million.
For the second quarter, Circuit City expects a loss from continuing operations before income taxes of $170 million to $185 million, compared with a loss of $128.2 million in the year-earlier second period.
It forecast year-over-year improvement in operating results beginning in the third quarter.